You have worked long and hard to obtain financial security through your pension and once you retire your money should be working just as hard for you. Many factors affect the benefits that you receive when you purchase an annuity, and of these your health can be the most important.
Every year there are people who purchase a standard retirement annuity unaware that they could have benefited from the enhanced rates offered by what the financial services industry refers to as an impaired life annuity. Partnership Assurance prefers to think of them as enhanced benefit annuities, because in effect that is what they are: they simply pay higher returns than standard annuities. And the differences can be significant. As the table opposite shows, a male aged 65 with a £50,000 fund and moderate health impairments for their age, could receive £143 PER MONTH more than with the average conventional annuity. Over an average 15-year lifespan, this enhanced annuity provides £25,740 additional benefits.
These benefits are provided with no difference in risks. Both products are identical, apart from the underwriting of your health.
As one of the UK’s fastest growing specialist providers of financial solutions for people with a history of health problems, we have designed our annuity plans to help you make the most of your financial situation whilst providing quotations and benefits as quickly and efficiently as possible.
Why purchase an enhanced annuity
Quite simply, depending on your impairment, you can receive more money than if you purchase a conventional annuity. Gross income from a Partnership Assurance annuity is guaranteed, regardless of how the stock market or any other investment performs.
The tables below are example comparisons of the benefits from conventional and enhanced annuities received by a man and a woman with moderate impairments.
| Male aged 65 | Male aged 65 | Male aged 70 | Male aged 70 | |
|---|---|---|---|---|
| Purchase price | Conventional annuity per annum |
Enhanced annuity per annum |
Conventional annuity per annum |
Enhanced annuity per annum |
| £10,000 | £668 | £1,003 | £776 | £1,817 |
| £50,000 | £3,441 | £5,158 | £3,986 | £9,106 |
| £100,000 | £6,905 | £10,362 | £7,994 | £18,262 |
| Female aged 60 | Female aged 60 | Male aged 65 | Male aged 65 | |
|---|---|---|---|---|
| Purchase price | Conventional annuity per annum |
Enhanced annuity per annum |
Conventional annuity per annum |
Enhanced annuity per annum |
| £10,000 | £548 | £714 | £611 | £854 |
| £50,000 | £2,842 | £3,727 | £3,157 | £4,420 |
| £100,000 | £5,708 | £7,498 | £6,337 | £8,885 |
Who qualifies for an enhanced annuity
Many illnesses are eligible for the enhanced benefits of an Impaired Life Annuity, most commonly heart disease, stroke, cancer and diabetes. In addition, minor conditions and other factors that do not qualify in their own right can further increase the benefits that you receive; these conditions could include hypertension, asthma, obesity or smoking.
There is no maximum age, all health conditions are considered and guaranteed quotations are available, with larger investments available on request.
Examples of the enhanced benefits received through an Impaired Life Annuity are illustrated in the table below.
Annual income for a purchase price of £50,000 net of the Pension Commencement Lump Sum
| Male aged 65 | Male aged 65 | Female aged 60 | Female aged 60 | |
|---|---|---|---|---|
| Severity of health conditions |
Conventional annuity per annum |
Enhanced annuity per annum |
Conventional annuity per annum |
Enhanced annuity per annum |
| Mild | £3,441 | £3,721 | £2,842 | £2,964 |
| Moderate | £3,441 | £5,158 | £2,842 | £3,727 |
| Severe | £3,441 | £8,734 | £2,842 | £4,528 |
Health conditions scenarios
| Mild | Moderate | Severe |
|---|---|---|
| A combination of: High blood pressure, high cholesterol, overweight and smoker (BP and cholesterol tablets taken daily) |
Treatment for heart failure with 2 heart attacks and suffering from angina |
Kidney failure, on dialysis, with a heart condition |
| Type II diabetes | Stroke, left with residual effects, smoker |
Long-term diabetes with peripheral vascular disease |
| - | - | Very serious conditions such as Terminal Cancer will be given individual consideration |
Our Annuities
Partnership Assurance's Purchased Life Annuity provides a regular income in exchange for a single payment of capital. The level of income that you will receive from your capital will depend on your health. The worse your health, the higher the income that you will receive. The funds to purchase a Purchased Life Annuity must come from a private source, which can include the Pension Commencement Lump Sum element of your pension savings.
Purchased Life Annuity
Partnership Assurance’s Purchased Life Annuity provides a regular income in exchange for a single payment of capital. The level of income that you will receive from your capital will depend on your health. The worse your health, the higher the income that you will receive. The funds to purchase a Purchased Life Annuity must come from a private source, which can include the Pension Commencement Lump Sum element of your pension savings.
When you pass away none of your initial purchase price is returned to your beneficiaries. However, there are options that permit your beneficiaries to receive an income after your death, and these are explained in more detail below.
Suitable for: Someone looking to generate a guaranteed regular income, for the rest of their lives, from a lump sum. You are able to decide at outset how to be paid and under what terms. For example, a Purchased Life Annuity may suit you if you want to enjoy an extra guaranteed income prior to receiving your main pension benefits.
Pension Annuity
If you exercise your Open Market Option you may choose to purchase Partnership Assurance's Pension Annuity, which will provide a regular income in exchange for a single payment of capital. The level of income that you will receive from a given purchase price will depend on your health and consequently your life expectancy. The worse your health, the higher the income that you will receive.
When you pass away none of your initial purchase price is returned to your beneficiaries, unless you elect to cover a percentage of the initial purchase price using Value Protection, or you can choose to select a Guaranteed Period, which permits your beneficiaries to receive an income after your death. These options are explained in more detail below.
Suitable for: Someone who wants to take advantage of their Open Market Option and benefit from the enhanced annuity rates that they could receive due to their medical history.
Escalation
This option allows you to increase your income annually. This will help your income retain its value in the face of inflation. Escalation needs to be selected and commence at the start of your annuity, and can select either a fixed percentage of between 1% and 8% per year or alternatively for Pension Annuities you can link your income to the Retail Price Index, although please note that should the Retail Price Index decrease, so shall your income.
Guaranteed period
By selecting to guarantee payments you can ensure that the income is paid for up to 10 years from the commencement of the annuity, if you die within the guaranteed period. For any Protected Rights funds, guarantee period is limited to up to 5 years. The beneficiaries will be taxed on the income at their standard rate of tax.
Value Protection
If you are considering purchasing a Pension Annuity and are under 75 years old, you are eligible to protect a percentage of the payment made when purchasing your Lifetime Annuity. The percentage you protect can be between 1% and 100% of the total payment. Should you die before your 75th birthday and there is an amount remaining under the Value Protection option, a lump sum payment will be made to your beneficiaries. The amount covered by Value Protection will reduce in line with all gross benefits you are paid from your Lifetime Pension Annuity. The option ceases when the amount covered by Value Protection equals zero or you reach your 75th birthday, whichever comes first. Any lump sum Value Protection payment made, is subject to a charge to income tax at 35%. This is a Special Lump Sum Death Benefits Charge and will be deducted by Partnership Assurance prior to the benefit being received by your beneficiaries. The higher the Value Protection percentage selected, the lower the basic payment you will receive. This option is not available for any Protected Rights benefits.
Legal Partner’s Benefit (or Dependant Annuity)
You can select a percentage of your annuity income to be paid in the event of your death to your legal partner (spouse or civil partner) for as long as they live. For both Pension Annuities and Purchased Life Annuities you are able to select up to 100% Legal Partner's Benefit. The higher the Legal Partner's Benefit selected the lower the basic payment you will receive. For the Protected Rights element of the fund, a 50% legal partner's benefit is automatically allocated if you have a legal partner at the outset of the annuity.
Where you have chosen Value Protection as well as legal partner's benefit, the Value Protection element is triggered by your death, providing you are under age 75, but payment is deferred until the death of your legal partner. After your death, the amount covered by Value Protection will continue to reduce in line with all gross benefits paid to your legal partner. Payment will be made on their death, irrespective of their age, provided there is still a value protected amount remaining. Payment due on the death of your legal partner will be made to their beneficiaries and is subject to a Special Lump Sum Death Benefits Charge, as explained above.
Payment options
Income frequency
Depending on your requirements, the annuity can be paid either monthly, quarterly, half yearly or annually.
Advance or arrears
For all of the premium frequency options, you can decide to receive the payments in advance or arrears (e.g. at the beginning or end of the month). If you choose to receive your income in arrears and you pass away between payments, your beneficiaries will not receive any benefit for the proportion of the period’s income that you were due. This means that you must live for the whole payment period (month, quarter, half year or year) to be entitled to your payment.
Accelerated Service
Partnership Assurance appreciates that having to detail personal health issues when purchasing an enhanced annuity makes it more time consuming than purchasing a standard annuity, and we therefore make the process as simple and quick as we can. Our experience allows us to operate an accelerated procedure, which aims to provide you with a binding quotation within 48 hours of receipt, valid for 30 days.
Sample qualifying conditions
Conditions that will allow you to qualify for an enhanced benefits annuity include:
Cancer:
e.g. Leukaemia, Hodgkin’s Disease Multiple and recurrent cancers of any description will qualify except those that are ostensibly cured.
Circulatory:
Heart disease, heart failure, heart attack, cardiomyopathy, stroke, cerebrovascular disease
Respiratory:
Chronic obstructive airways disease, emphysema
Neurological:
Parkinson’s disease, motor neurone, multiple sclerosis, Alzheimer’s
Diabetes:
Long-term diabetes with complications
Transplants:
Any major organ including heart, lung and liver
Other conditions:
Cirrhosis of the liver, AIDS, renal failure
Will my income change depending on stock market performance?
No. Your payments are guaranteed and will not change, regardless of what happens to the markets.
Will my beneficiaries receive any of my initial investment when I die?
No, your initial investment will not be returned to your beneficiaries, unless you have chosen to cover a percentage of the purchase price under Value Protection and you die before your 75th birthday. You are, alternatively, able to ensure that your beneficiaries continue to receive an income by selecting to guarantee payments and/or legal partner's benefits. If your fund includes Protected Rights you will not be able to protect the Protected Rights element of the fund.
Will I have to pay tax on my income?
All retirement annuities are liable to income tax – although how the tax is applied depends on the type of annuity. Whether you have to pay tax will depend on the amount of income you receive. Please speak to your financial adviser who will be able to help you calculate your potential tax liability. Any lump sum Value Protection payment made is subject to a deduction of 35% in respect of the Lump Sum Death Benefits Charge. Any tax rules mentioned in this brochure are accurate as of 24 October 2006. However, the rules governing tax change frequently so we ask you to check all the relevant information with your financial adviser prior to purchasing an annuity.
Will I receive the income listed in the tables in this brochure?
Partnership Assurance calculates every client’s benefit eligibility individually, and we have a policy of continually monitoring and updating our products. While the income figures were accurate on 24 October 2006, it is most likely that your individual circumstances and other factors will mean that your own income entitlements will differ from those in the brochure tables.
If I receive my income in arrears and die part way through a payment period will my beneficiaries receive any income for this incomplete payment period?
No. You must live for the whole payment period (month, quarter, half year or year) to be entitled to your income payment.